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[Parmenides]

Microsoft Reports Third-Quarter Results (January 1, 2012 to March 31, 2012)

Income Statements

Revenue ---> $17.41 billion

Operating Income ---> $6.37 billion

Net Income ---> $5.11 billion

Entertainment And Devices Division

Revenue ---> $1.62 billion


Operating Loss ---> $229 million

Xbox 360 Worldwide Hardware Unit Sales (Unit:Million)

  FY          Jl-Sp    Oc-Dc    Ja-Mr    Ap-Jn     FY       LTD

2005/06        -        1.5      1.7      1.8      5.0      5.0

2006/07        1.0      4.4      0.5      0.7      6.6      11.6    

2007/08        1.8      4.3      1.3      1.3      8.7      20.3    

2008/09        2.2      6.0      1.7      1.2      11.2     31.5     

2009/10        2.1      5.2      1.5      1.5      10.3     41.8

2010/11        2.8      6.3      2.7      1.7      13.7     55.3 

2011/12        2.3      8.2      1.4       -       11.9     67.2

Earnings Release FY12 Q3

Xbox 360 LTD

 

[Paches]

Snippet from the The Verge for context:

The home of the Xbox reported $1.6 billion in quarterly revenue and an operating loss of $229 million, compared with last year's $1.9 billion revenue and $210 million operating profit.

 

[Dreams-Visions]

I wonder if the Entertainment division will ever have a profitable quarter.

Edit: oh they had a profitable quarter last year? Is that the exception for them?

 

[-Pyromaniac-]

Them windows licenses and Office be selling like hot cakes.

Loss for entertainment is predictable.

 

[Lagspike_exe]

That's a huge decline compare with the last year. Did they overship last quarter? What are the PS3 and Wii numbers?

 

[lunchwithyuzo]

Looks like Q2 was overshipped, they're probably going to be down YOY for FY12. We'll get pricedrops in FY13, right in time for Wii U.

 

[Sho_Nuff82]

Any explanation for what's behind the losses?

I wonder if the Entertainment division will ever have a profitable quarter.

Edit: oh they had a profitable quarter last year? Is that the exception for them?

They've been profitable every year since 2009 I believe.

 

[MagicWithEarvin]

Dumb question (I don't really follow these things), but how does the Xbox division turn in a $1.6 billion revenue but still have a loss of $226 million? Is MS selling every 360 at a loss?

 

[bigtroyjon]

Any explanation for what's behind the losses?

Windows Phone payments to Nokia, increased marketing(likely for Windows Phone, and increased R&D(would guess next xbox and windows phone both contributing to this.)

Along with the big reduction in gaming revenue.

 

[KorrZ]

Yeah, a bit confused about the losses. 360 has been kicking everyones ass the past few months, why the lack of profits?

 

[Celine]

I wonder if the Entertainment division will ever have a profitable quarter.

Edit: oh they had a profitable quarter last year? Is that the exception for them?

EED had many profitable quarters in the last few years.

 

[Kusagari]

Yeah, a bit confused about the losses. 360 has been kicking everyones ass the past few months, why the lack of profits?

The entertainment division includes things like Zune and MS's phones. Without 360, the division would look like an absolute disaster.

 

[jbug617]

I really don't much about the financials but is it possible operating loss to come from R&D a new console?

 

[Road]

Xbox platform revenue was ~1.2 billion or ~73% of all EDD. (During FY11Q3 it was 90%)

http://www.microsoft.com/investor/E...s/PressReleaseAndWebcast/FY12/Q3/default.aspx

EDD revenue decreased primarily reflecting lower Xbox 360 platform revenue, offset in part by Skype revenue and Windows Phone software license revenue from Nokia. Xbox 360 platform revenue decreased $584 million or 33%, due mainly to decreased volumes of Xbox 360 consoles and standalone Kinect sensors sold, offset in part by higher Xbox LIVE revenue. We shipped 1.4 million Xbox 360 consoles during the third quarter of fiscal year 2012, compared with 2.7 million Xbox 360 consoles during the third quarter of fiscal year 2011.

EDD operating income decreased reflecting lower revenue, payments made to Nokia related to joint strategic initiatives, and higher other operating expenses. Research and development expenses increased $100 million or 35%, and sales and marketing expenses increased $79 million or 50%, primarily reflecting higher headcount-related expenses. Cost of revenue decreased $80 million or 6% primarily due to lower volumes of Xbox 360 consoles and standalone Kinect sensors sold, offset in part by payments made to Nokia.

 

[Miles X]

I wonder if the Entertainment division will ever have a profitable quarter.

Edit: oh they had a profitable quarter last year? Is that the exception for them?

Uh .. this will be their 5th profitable fiscal year in a row.

 

[thirty]

Blame WindowsPhone

 

[Massa]

I really don't much about the financials but is it possible operating loss to come from R&D a new console?

From Road's quote:

" Research and development expenses increased $100 million or 35%"

 

[watership]

Blame WindowsPhone

But I love Windows phone. :\

 

[elcranky]

I wonder if the Entertainment division will ever have a profitable quarter.

Edit: oh they had a profitable quarter last year? Is that the exception for them?

Entertainment has been making a ton of money. If we were able to isolate the 360 business, I wouldn't be surprised if it was $2 to $3 Billion in the black LTD, even with RROD. The last several years it has been massively profitable.

 

[KillerMan91]

A lot lower shipment numbers than last year but still more than I expected. I assumed they overshipped big time during last quarter. Now it looks like they overhipped only slightly. I still wonder though where in the hell they shipped all those consoles last quarter. US sales were flat, In Europe sales were little down and in Japan nonexistant. Maybe they have stepped their game up in developing markets. X360 is pretty easy to pirate so that could make it more appealing to developing countries. Looking foward to Sony's shipment numbers.

 

[Special J]

I really don't much about the financials but is it possible operating loss to come from R&D a new console?

Blame WindowsPhone

.

 

[elcranky]

But I love Windows phone. :\

Windows phone is by far the best phone, but MS needs to spend like mad to overcome iOS brainwashing.

 

[CadetMahoney]

Sony now your turn. . .

Sony?

 

[-Pyromaniac-]

Windows phone is by far the best phone, but MS needs to spend like mad to overcome iOS brainwashing.

.................................................

 

[The Abominable Snowman]

Windows phone is by far the best phone, but MS needs to spend like mad to overcome iOS brainwashing.

Or, or.. They could make WP7 stand out on its own. They were on the right track at one point.

 

[Miles X]

5.2m gap between PS3 and Xbox 360, Sony said last quater they expected 2 mill PS3's for Q1, so around 3.2 mill gap between the two. Unless of course Sony exceed/fail expectations.

 

[RiccochetJ]

I never fully understand what shipped means. I always thought that it was what they sold to retailers like Walmart etc. So when people say "overshipped", does that mean that there is an agreement for places like Walmart to return unsold units? I'm probably way off on all of this.

Interesting/exciting to hear that R&D expenses increased by $100 million. I wonder how that's divvied up in the division?

 

[krae_man]

I wonder how much of the lost revenue is declining Call of Duty Sales.

 

[Thoraxes]

Hurry up, while you still have good sales and profitability per console sold, introduce a new console!

 

[gogogow]

I wonder how much of the lost revenue is declining Call of Duty Sales.

MW3 console versions actually increased in sales.

 

[Scapegoat]

Windows phone is by far the best phone, but MS needs to spend like mad to overcome iOS brainwashing.

The PS3 is by far the best console, but Sony needs to spend like mad to overcome Xbox brainwashing.

Xbox platform revenue was ~1.2 billion or ~73% of all EDD. (During FY11Q3 it was 90%)

http://www.microsoft.com/investor/E...s/PressReleaseAndWebcast/FY12/Q3/default.aspx

Sounds good, getting excited for next gen. How much is 100 million relative to other console R&D pushes?

 

[Elios83]

Sony now your turn. . .

Sony?

Nintendo should come first.
Sony will report their datas on May 10, they expect 2m+ PS3 shipments, 1-1.5m Vita shipments and the mega loss they have already announced for the whole fiscal year.
Forecast for the next fiscal year for both PS3 and Vita will be interesting though since they will shed light on things like price drops, big games coming,etc.
Btw Microsoft has overshipped big time during last quarter, not that it comes as a suprise, 1.4m is their lowest Q1 shipment since 2007/2008.
Of course it's pretty resonable to expect a 50$ price cut on the whole Xbox family later this year.

 

[krae_man]

MW3 console versions actually increased in sales.

Yeah, I just searched out that article. Still the higher launch numbers were in the previous quarter, so sales still could be down this one.

 

[Cygnus X-1]

I thought the Xbox business was now in the black figures. What happened?

 

[Carl]

Wow, major overshipping last quarter then

 

[GopherD]

A lot lower shipment numbers than last year but still more than I expected. I assumed they overshipped big time during last quarter. Now it looks like they overhipped only slightly.

Only "slightly". They are down on shipments yoy by nearly 50%. In fact, its their worst shipment result for the quarter for a number of years. After their record Christmas quarter, this brings that result into heavy focus. In the old days, they would be accused of channel stuffing.

But regardless what they ship, when you are making a loss and have 50% yoy shipment drops, that loss is due to lack of revenue.

That must surely put pressure on a price drop.

 

[RukusProvider]

Wow, major overshipping last quarter then

After their Nov sales, I'm sure they shipped December to be inline with historical increases. That didn't happen thus pending stock.

 

[Clear]

Unsurprising they overshipped given the gangbuster November, and slower Dec/Jan sales.

 

[watership]

Windows phone is by far the best phone, but MS needs to spend like mad to overcome iOS brainwashing.

Well some criticism towards the platform is accurate and fair, but a lot has to do with the name, and the brand. And I would love for it to get better.

 

[RukusProvider]

The most interesting thing here would be to learn which subdivision that R&D money went to.

I'm afraid it might be for Win8 mobile since the expected release window for that is much closer than the next Xbox.

 

[Captain Tuttle]

Xbox platform revenue was ~1.2 billion or ~73% of all EDD. (During FY11Q3 it was 90%)

http://www.microsoft.com/investor/E...s/PressReleaseAndWebcast/FY12/Q3/default.aspx

EDD revenue decreased primarily reflecting lower Xbox 360 platform revenue, offset in part by Skype revenue and Windows Phone software license revenue from Nokia. Xbox 360 platform revenue decreased $584 million or 33%, due mainly to decreased volumes of Xbox 360 consoles and standalone Kinect sensors sold, offset in part by higher Xbox LIVE revenue. We shipped 1.4 million Xbox 360 consoles during the third quarter of fiscal year 2012, compared with 2.7 million Xbox 360 consoles during the third quarter of fiscal year 2011.

EDD operating income decreased reflecting lower revenue, payments made to Nokia related to joint strategic initiatives, and higher other operating expenses. Research and development expenses increased $100 million or 35%, and sales and marketing expenses increased $79 million or 50%, primarily reflecting higher headcount-related expenses. Cost of revenue decreased $80 million or 6% primarily due to lower volumes of Xbox 360 consoles and standalone Kinect sensors sold, offset in part by payments made to Nokia.

Next Xbox or something else?

 

[bigtroyjon]

Next Xbox or something else?

Next xbox and something else.

 

[UraMallas]

The most interesting thing here would be to learn which subdivision that R&D money went to.

I'm afraid it might be for Win8 mobile since the expected release window for that is much closer than the next Xbox.

I hope it is for WP8, honestly.

 

[EGM1966]

I never fully understand what shipped means. I always thought that it was what they sold to retailers like Walmart etc. So when people say "overshipped", does that mean that there is an agreement for places like Walmart to return unsold units? I'm probably way off on all of this.

Interesting/exciting to hear that R&D expenses increased by $100 million. I wonder how that's divvied up in the division?

Overshipped is basically selling more to retail than retail needs. Most common 2 reasons are retailers expected more sales than they got and bought more than they needed or the supplier (in this case Microsoft) offers deals that encourage retailers to order more.

Haven't been tracking shippments and the market enough to offer an opinion either way on the why but the upshot is that last quarter retailers bought more than they needed (i.e. MS overshipped) and this quarter orders are way down as retailers continue to sell the excess from last quarter.

Given how last year MS were so public about selling the most I presume that they may have offered deals to encourage a big quarter so they could claim a (somewhat manufactured) yearly total. Could be wrong on that of course.

As for the R&D no idea how that's been split.

 

[Phonomezer]

Dat R&D...

 

[KageMaru]

2010/11 2.8 6.3 2.7 1.7 13.7 55.3

2011/12 2.3 8.2 1.4 - 11.9 67.2

Yup, definitely overshipped last quarter.

Not sure if this is the case but $100 million sounds like a lot in R&D for a single quarter. I'm assuming it's for both Durango and windows phone?

 

[Wolfie5]

NVM

 

[KillerMan91]

Only "slightly". They are down on shipments yoy by nearly 50%. In fact, its their worst shipment result for the quarter for a number of years. After their record Christmas quarter, this brings that result into heavy focus. In the old days, they would be accused of channel stuffing.

But regardless what they ship, when you are making a loss and have 50% yoy shipment drops, that loss is due to lack of revenue.

That must surely put pressure on a price drop.

Well last years numbers are more like abnormity as they were riding Kinect sales and X360 was actually in short supply after christmas so they shipped record number in Q3. 1.4 is not that much less than 1.5 and 1.7 in previous years. I was honestly expecting sub million shipment after those last quarter shipment numbers and looking sales data what we have gotten from the world. They overshipped during Q2 but a lot less than I expected. Still wondering where they shipped those consoles though.

 

[bigtroyjon]

Yup, definitely overshipped last quarter.

Not sure if this is the case but $100 million sounds like a lot in R&D for a single quarter. I'm assuming it's for both Durango and windows phone?

100 million is the increase, total is 385 million.

 

[gofreak]

Yup, definitely overshipped last quarter.

Not sure if this is the case but $100 million sounds like a lot in R&D for a single quarter. I'm assuming it's for both Durango and windows phone?

$100m would be small.

This was a $100m increase, $385m total. Which is more in line with what you'd expect I think.

That is for EDD total, game, mobile etc. No doubt a good deal of that increase relates to next-gen game activity.